The profit-maximizing firm illustrated in Figure operates in a monopolisticallycompetitive industry. Which of the following best explains what happens in thelong run?Price4OMCATCAVCDMRQuantity DMRQuantityONew firms enter the industry and the firm's marginal cost curve shifts up, which leadsto a decrease in the firm's output.New firms want to enter the market but cannot since there are barriers to entry inmonopolistic competition.ONew firms enter the industry and the firm's demand curve shifts left and becomesmore elastic.O The market supply curve shifts right, reducing the equilibrium market price.

Profit maximization is the process by which a company aims to increase its earnings to the highest…

Answered: The profit-maximizing firm illustrated…

The profit-maximizing firm illustrated in Figure operates in a monopolistically competitive industry. Which of the following best explains what happens in the long run? Price MC ATC AVC D MR

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

The profit-maximizing firm illustrated in Figure operates in a monopolistically
competitive industry. Which of the following best explains what happens in the
long run?
Price
4
O
MC
ATC
AVC
D
MR
Quantity

D
MR
Quantity
O
New firms enter the industry and the firm's marginal cost curve shifts up, which leads
to a decrease in the firm's output.
New firms want to enter the market but cannot since there are barriers to entry in
monopolistic competition.
O
New firms enter the industry and the firm's demand curve shifts left and becomes
more elastic.
O The market supply curve shifts right, reducing the equilibrium market price.

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